Number of Unbanked and Underbanked Americans Increases

The Federal Deposit Insurance Corporation (FDIC) released the results of their 2011 National Survey of Unbanked and Underbanked Households. According to the report, a household is counted as unbanked if they do not have any federally insured deposit accounts. This would include accounts at credit unions, which are federally insured under the National Credit Union Administration (NCUA). A household is counted as underbanked if they have a bank account, but rely on alternative financial services such as non-bank money orders, check cashing services, payday loans, rent-to-own services, pawn shops, and other non-bank services.

The report found that there had been a 0.06% increase in unbanked households and 1.9% increase in underbanked households in just two years. Minorities and lower-income individuals are disproportinately likely to be unbanked or underbanked. 1 in 5 Black, Hispanic, and Foreign-born households are unbanked.

According to research released by the RAND Center for Financial and Economic Decision Making, these numbers may actually be conservatively low. That study found that 15.5% of individuals responding that they were unbanked. This study also found that a disproportionate amount of Blacks and Hispanics reported that they were unbanked.

Both studies point to two main reasons why these individuals are unbanked; lack of money and no desire to apply. However, when the RAND Center asked further questions on this report almost a quarter of the individuals said that they did not have a bank account because they did not have physical access to the bank (could not get to the bank location during open hours). This population does not seem to be limited by financial concerns, but by their actual ability to access the industry. These communities, often rural, are loosing access to capital and economic opportunity based solely on their location and the banking industries inability to reach these populations.

This is one of the main reasons why Community Development Financial Institutions (CDFIs) were formed, to provide financial services to communities that are not served by traditional banking practices. Perhaps an interesting next point of research for the RAND Center and the FDIC may be to look into the number of communities that would be unbanked if it were not for their local CDFIs.